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Thread: A Modern War Between The States

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    Banned Eric Stoner's Avatar
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    Default A Modern War Between The States

    New Hampshire vs. Massachusetts - Governor Patrick proudly announced a two day sales tax holiday just in time for back to school shopping. N.H.'s Governor Lynch responded by reminding shoppers that N.H. has NO sales tax.

    New York vs, Connecticutt - When the N.Y. Legislature had a plan to treat carried interest earned by hedge fund employees who commute into N.Y. as income, Governor Rell sent hedge fund managers a letter inviting them to move their offices to Connecticut. Mayor Bloomberg and Governor Patterson had to explain some basic facts of life to the dummies in the Legislature to stop it . For now.

    Nevada and Arizona vs. California - Both have profitted from wealthy Californians and businesses relocating.

    New Jersey vs. Delaware and Pennsylvania- Jersey has been bleeding jobs and rich folks to both neighboring states for over a decade.

    We are going to see more interstate brawling because when the Bush cuts expire, state tax rates are going to be even more important than they already are. If Mass. or New York raise taxes, their neighbors rejoice. Likewise, when we raise Federal taxes, we make Europe's day.

    If we look at which states are weathering the current recession best, it is states like North Dakota and Texas. Both with low taxes. Except for Nevada and Florida, our hardest hit states are all high tax and heavily regulated: Ohio, Michigan, Illinois, N.Y., N.J. and California.
    Last edited by Eric Stoner; 09-08-2010 at 08:03 AM.

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    Default Re: A Modern War Between The States

    ^^^ all true ! Unfortunately, a new 'twist' is increasingly being used to reduce differentials between overall state tax levels. That new 'twist' of course is the increasing use of federal tax money collected from taxpayers in ALL states to provide funding for block grants / medicaid matching funds / highway matching funds / education matching funds that disproportionately favor certain states. Also, given that the 'favored' states also tend to have high state income tax rates and high property tax rates, which are deductible against federal income taxes due, the actual amount of federal taxes paid by residents of those 'favored' states is lower for the same income level compared to taxpayers in 'non-favored' states !

    The 'gold foil hat' crowd drew an analogy between this new 'twist', i.e. federal tax revenues being transferred from low tax rate responsible spending level states to high tax rate irresponsible spending level states, to the situation which now exists in EuroLand. In other words, Greece corresponds to California and Illinois, and Germany corresponds to Texas and North Dakota ... and this new 'twist' actually comprises a 'stealth' bailout ! And of course with rising federal income tax rates already in the pipeline for January first, the differential will be further reduced ( i.e. the dollar value of the state and local tax deduction will increase )

    ~
    Last edited by Melonie; 09-07-2010 at 02:34 PM.

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    Default Re: A Modern War Between The States

    You're making stuff up again. California and Illinois both provide more revenue to the federal government than they get back in return.

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    Default Re: A Modern War Between The States

    California and Illinois get back .78 and .75 of each dollar they put in. Texas gets back .94.

    http://www.visualeconomics.com/unite...l-tax-dollars/

    Seems like conservative Mississippi and Alabama are the states that correspond with Greece.

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    Default Re: A Modern War Between The States

    ^^^ red herring as usual - you're attempting to count ALL federal spending within a state, most of which pertains to military or other federal operations that have no overlap with state spending on 'jointly' funded programs like medicaid, education, etc. You're also attempting to skew statistics by the fact that California and Illinois have a high percentage of state residents who pay zero in federal and state income taxes ( which is arguably the true root of financial problems in those states ).

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    Default Re: A Modern War Between The States

    Again, you're making stuff up. California and Illinois both have much higher median incomes than Texas, which would most likely mean California and Illinois both have a much higher percentage of residents paying federal income tax.

    http://www.workworld.org/wwwebhelp/s...ian_income.htm

    Texas does not have a state income which means zero percent of Texas residents pay state income tax.

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    Default Re: A Modern War Between The States

    Actually you are both right and afaic it OUGHT to be irrelevant. What sense does it make for the taxpayers of any state to have to send money to Washington for a night on the town and then have it returned via Federal largesse ? Wouldn't it make more sense to return more and more functions to the states ? And let their taxpayers keep their money or be taxed to fund state and local programs. Until FDR came along, that is mostly how it worked.

    The point of this thread is that we are going to see MORE interstate competition with tax and regulatory policy being the major selling points as the states compete with each other for wealthy residents and business.

    To my list we can also add Idaho which has gained residents and business from all three of its Western neighbors : Washington, Oregon and California.

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    Default Re: A Modern War Between The States

    Quote Originally Posted by eagle2 View Post
    California and Illinois get back .78 and .75 of each dollar they put in. Texas gets back .94.

    http://www.visualeconomics.com/unite...l-tax-dollars/

    Seems like conservative Mississippi and Alabama are the states that correspond with Greece.
    Again you are correct, up to a point. As I previously explained in other related threads, LBJ and the Dem congressional leadership had to make a deal with racist Southern Senators and Congressmen to get Medicaid passed in 1965. The deal was that "poor" states like Alabama would not have to contribute the same percentage that wealthier states like N.Y. and California did. In less than ten years those and other states realized what a Faustian bargain had been made by their Federal representatives as the portion of their budgets going to Medicaid kept climbing and climbing. Ironically, part of the cost was all the people they had to hire to administer Medicaid and other Federal programs who are now retired with fat, unaffordable pensions.
    Last edited by Eric Stoner; 09-09-2010 at 08:42 AM.

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    Default Re: A Modern War Between The States

    The Fed tax payment and and allotments data (based on data supplied by the tax foundation) is a prime (but not final) indicator of how taxpayers in one state support taxpayers in another state. (This is in the same sense that people paying more tax support those not paying as much tax.) It also shows tax favoritism which by all rights should be levelized (more closely) throughout the country. I'd love the see the source data for ...
    Last edited by threlayer; 09-10-2010 at 08:13 AM.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: A Modern War Between The States

    Actually, the welfare systems aren't the true root of the problem in Illinois. The true root is the corruption in in the government, including hiring people that shouldn't be. I know, I live in Illinois, worked for a corrupt agency that claims to be broke, but really isn't. Sure, the welfare system is broke, I won't argue that, but if the corruption was fixed, there would be a lot more money.

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    Default Re: A Modern War Between The States

    Quote Originally Posted by Kellydancer View Post
    Actually, the welfare systems aren't the true root of the problem in Illinois. The true root is the corruption in in the government, including hiring people that shouldn't be. I know, I live in Illinois, worked for a corrupt agency that claims to be broke, but really isn't. Sure, the welfare system is broke, I won't argue that, but if the corruption was fixed, there would be a lot more money.
    You're right, especially if we use a broad enough definition of "corruption" to cover all the featherbedding, hiring of spouses and children, and the double and triple dipping where appointees routinely collect on three pensions.

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    Default Re: A Modern War Between The States

    We can also add South Carolina which is continuing its tradition of welcoming relocating manufacturing from other union states. The latest is Boeing which is building its new 787's in South Carolina and NOT its traditional, union dominated home of Seattle, Washington.

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    Default Re: A Modern War Between The States

    Quote Originally Posted by Eric Stoner View Post
    You're right, especially if we use a broad enough definition of "corruption" to cover all the featherbedding, hiring of spouses and children, and the double and triple dipping where appointees routinely collect on three pensions.
    There was a story awhile back about a government official (forget which one offhand) who worked several government jobs and collected pensions on all of them. There was also a recent story about the former head of my former employer that was caught stealing from them and instead of facing it, committed suicide. I saw so much corruption, tried to blow the whistle, but many of the newspapers are only discussing it now. My former employer would create new positions just so some big wig's (who got his job through corruption) kid could get a job. The head of HR got her job through a local politician/"minister" (not Jesse Jackson but an ally of his) and the entire HR department consisted of his church members. The head of HR also managed to get her lazy daughter a job as head of one of the accounting departments though she had no experience (and in fact they bypassed a qualified person to appoint her). And so many more stories, yet they claim to always be broke. If there was a "housecleaning" to get rid of unqualified people and those this would literally save millions a year.

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    Default Re: A Modern War Between The States

    Again, you're making stuff up. California and Illinois both have much higher median incomes than Texas, which would most likely mean California and Illinois both have a much higher percentage of residents paying federal income tax.

    Texas does not have a state income which means zero percent of Texas residents pay state income tax.

    Apparently you missed my point, so I'll try a graphic example. A Texas resident earns $100,000 a year. He perhaps owes ~$30,000 to the IRS but zero to the state of Texas in income taxes. An Illinois resident earns a similar $100,000 a year. Because Illinois assesses an income tax, the Illinois resident owes say $6,000 in state income taxes. But that state income tax payment is deductible from federal income tax liability, meaning that the Illinois resident only need pay ~$ 28,000 to the IRS. In that sense, federal income tax payers living in states with low / no state income tax are forced to pay a proportionately higher share of their gross earnings to the IRS than are federal income tax payers living in states with high state income taxes.

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    Default Re: A Modern War Between The States

    ^^ You missed a few critical terms in your equations, perhaps by design, but total tax is more significant than tax paid to a particular authority. (unless one has a particular bug about that particular taxing authority, which your bank account doesn't care about at all)

    TEXAS: Tot_tax_pd = 30,000

    ILLINOIS: Tot_tax_pd = 34,000 (= 28,000 + 6,000)
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: A Modern War Between The States

    Obviously I understand the point about total tax ... which in terms of my example provides a $4000 a year total incentive to move out of Illinois. But the larger point was that the IRS will charge that person a de-facto $2000 a year 'penalty' in additional federal income taxes on the same number of dollars earned if they move to Texas.

    It's one thing for a state to levee high taxes ... because essentially none of those state tax revenues are going to flow outside of that state. It is another thing for the federal gov't to allow those high state taxes to reduce effective federal tax rates for one American taxpayer living in a high tax rate state. Obviously this phenomenon has been going on so long that it's not on anybody's radar screen. However, when some state + local tax rates are now being raised to the 10% plus ballpark. the increased dollar value of this stealth federal 'subsidy' needs to be recognized for what it is.

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    Default Re: A Modern War Between The States

    { hits self up side of head } .... duh !

    What am I worried about the deductibility of state income taxes for ? If the US congress doesn't act before the end of the year, come January 1st any US federal taxpayer earning $100k a year is going to 'lose' their state tax deduction anyhow due to the A.M.T. !!!

    However, this will also mean that the earlier example's $4000 annual incentive to relocate from Illinois to Texas will increase to the full $6,000 amount of Illinois state income tax savings !

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    Default Re: A Modern War Between The States

    Economic dead zones.

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    Default Re: A Modern War Between The States

    In spite of my hoping the Bush tax cuts will end (for the rich), it is obvious that the inflation adjustments for other tax issues should also be extended to the AMT, so that the threshhold for AMT rules will be essentially eliminated for middle class taxpayers. That income class is not what the AMT was ever enacted for. But somehow that issue was 'overlooked' (again) when the Bush rich person tax cuts were enacted.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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